Northern Exposure

Employee Class Actions May Become More Common in Canada

By Brian P. Smeenk

Class actions in Canada for unpaid overtime or other employment claims have met with mixed results in the past. Now the rules of the class action game – at least in the employment context – may be a little clearer.

On June 26 the Ontario Court of Appeal issued its decisions in three closely watched cases: Fulawka v. The Bank of Nova Scotia , Fresco v. Canadian Imperial Bank of Commerce, and McCracken v. Canadian National Railway Company.

What the Three Cases Are About

All three of these class actions were against large, federally regulated employers. Canadian National Railway (CNR) is one of North America’s largest. The two banks are among Canada’s five largest banks.

The claim for unpaid overtime in McCracken rested on the allegation that CNR had misclassified a large number of employees as managers. This would mean that CNR unlawfully avoided its obligation to pay overtime.

In the Fulawka and Fresco cases, the crux of the claims is that the overtime policies of the banks imposed more restrictive conditions for receiving overtime pay than those in the applicable statute, the Canada Labour Code.

The claims focus in part on the banks’ policies requiring prior approval from a manager in order to be compensated for overtime work. It’s claimed that such policies are used to avoid the obligation to pay for overtime work that is required or permitted. The claims also rely on the banks’ alleged failures to implement proper record-keeping systems for recording the overtime hours worked.

Criteria for Class Actions

There are statutory criteria in many provinces as to what kind of claim can be pursued as a class action. Only if those criteria are met will the courts allow an action to proceed. Ontario’s criteria for certifying an action as a class proceeding aren’t unlike those in other provinces. They can be summarized as follows:

  • a proper legal claim or cause of action;
  • the class of claimants can be identified;
  • the claims raise common issues;
  • a class action is the best process for resolving the common issues; and
  • appropriate representative plaintiffs and a workable litigation plan for the case.

 Contentious Issues

A hotly contested issue in all three cases was issue C: Did the claims raise common issues? The Fulawka case also addressed issue D: whether the class action is the preferable procedure for resolving common issues, or is the dispute resolution procedure for overtime claims under the Canada Labour Code preferable?

 Court’s Conclusions

The appeal court found that the claims in McCracken based on misclassification were not suitable for a class action. But it found that the claims in the Fulawka and Fresco cases should be certified as class actions.

In McCracken, the court found that because the job functions, titles, and workplaces of first-level supervisors varied widely, there was insufficient commonality. The trial judge wouldn’t be able to determine the misclassification issue without resorting to the evidence of individual class members. In a different case, the similarity of job duties performed by class members might provide sufficient commonality to be amenable to a class action. But not here.

In the Fulawka and Fresco cases, however, the court didn’t buy the argument that the case was really about individualized claims of thousands of employees across Canada. There are common issues about allegedly improper policies and systematic practices of the employers. To the extent that such policies and practices fall short of the employer’s duties to employees, these elements of potential liability can be determined on a classwide basis. They don’t depend on individualized facts.

The court came to this conclusion despite finding that it would not be possible to assess the monetary relief for the class of employees on an aggregate basis if the banks are found to be liable. Proof of entitlement to compensation would still have to be done on an individual basis. But this didn’t prevent the cases from being certified as class actions.

The court went on to find that the class action procedure is also the preferable procedure in these two cases. The courts have broader remedial authority than would inspectors and referees under the Code. And efficient methods of resolving individual overtime claims could be found within the class proceeding.

Key Takeaways for Employers

These three decisions provide both good news and bad news for Canadian employers. On the one hand, it would appear that it will be difficult for misclassification cases to be pursued as class actions. The exception may be where the proposed class consists of similar jobs with similar working conditions.  On the other hand, where there is some factual basis for claims alleging improper policies or systemic practices that violate employees’ rights, class actions may now be more feasible.

These cases also serve to remind us of the importance of ensuring that your policies fulfill all legal obligations; that your actual practices are consistent with those obligations; and that you have good dispute-resolution processes in place to deal with such claims. Fasken Martineau DuMoulin can assist you to minimize your exposure to such claims.